ch 9- Strategic Management.pptnewuuuuuuu

11th edition
Steven P. Robbins
Mary Coulter
Strategic Management

 The set of managerial decisions
and actions that determines
the long-run performance
of an organization.
Copyright © 2005 Prentice Hall, Inc. All
rights reserved.
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1. It results in higher organizational
performance.
2. It requires that managers examine and adapt
to business environment changes.
3. It coordinates diverse organizational units,
helping them focus on organizational goals.
4. It is very much involved in the managerial
decision-making process.
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 Step 1: Identifying the organization’s current
mission, objectives, and strategies
◦ Mission: the firm’s reason for being
 The scope of its products and services
◦ Goals: the foundation for further planning
 Measurable performance targets
 Step 2: Conducting an external analysis
◦ The environmental scanning of specific and general
environments
 Focuses on identifying opportunities and threats
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 Step 3: Conducting an internal analysis
◦ Assessing organizational resources, capabilities,
activities, and culture:
 Strengths (core competencies) create value for the
customer and strengthen the competitive position of
the firm.
 Weaknesses (things done poorly or not at all) can place
the firm at a competitive disadvantage.
 Steps 2 and 3 combined are called a SWOT
analysis. (Strengths, Weaknesses, Opportunities,
and Threats)
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 Step 4: Formulating strategies
◦ Develop and evaluate strategic alternatives
◦ Select appropriate strategies for all levels in the
organization that provide relative advantage over
competitors
◦ Match organizational strengths to environmental
opportunities
◦ Correct weaknesses and guard against threats
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 Step 5: Implementing strategies
◦ Implementation: effectively fitting organizational
structure and activities to the environment
◦ The environment dictates the chosen strategy;
effective strategy implementation requires an
organizational structure matched to its
requirements.
 Step 6: Evaluating Results
◦ How effective have strategies been?
◦ What adjustments, if any, are necessary?
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 Corporate Strategies
◦ Top management’s overall plan for the entire
organization and its strategic business units
 Types of Corporate Strategies
◦ Growth: expansion into new products and markets
◦ Stability: maintenance of the status quo
◦ Renewal: address organizational weaknesses that
are leading to performance declines by cutting
costs and restructuring organizational operations
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 Growth Strategy
◦ Seeking to increase the organization’s business by
expansion into new products and markets.
 Types of Growth Strategies
◦ Concentration
◦ Vertical integration
◦ Horizontal integration
◦ Diversification
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 Concentration
◦ Focusing on a primary line of business and
increasing the number of products offered or
markets served.
 Vertical Integration
◦ Backward vertical integration: attempting to gain
control of inputs (become a self-supplier).
◦ Forward vertical integration: attempting to gain
control of output through control of the distribution
channel and/or provide customer service activities
(eliminating intermediaries).
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 Horizontal Integration
◦ Combining operations with another competitor in
the same industry to increase competitive strengths
and lower competition among industry rivals.
 Related Diversification
◦ Expanding by merging with or acquiring firms in
different, but related industries that are “strategic
fits”.
 Unrelated Diversification
◦ Growing by merging with or acquiring firms in
unrelated industries where higher financial returns
are possible.
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 Stability Strategy
◦ A strategy that seeks to maintain the status quo to
deal with the uncertainty of a dynamic environment,
when the industry is experiencing slow- or no-
growth conditions, or if the owners of the firm elect
not to grow for personal reasons.
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 Renewal Strategies
◦ Developing strategies to counter organization
weaknesses that are leading to performance
declines.
 Retrenchment: focusing of eliminating non-critical
weaknesses and restoring strengths to overcome
current performance problems.
 Turnaround: addressing critical long-term
performance problems through the use of strong cost
elimination measures and large-scale organizational
restructuring solutions.
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 BCG Matrix
◦ Developed by the Boston Consulting Group
◦ Considers market share and industry growth rate
◦ Classifies firms as:
 Cash cows: low growth rate, high market share
 Stars: high growth rate, high market share
 Question marks: high growth rate, low market share
 Dogs: low growth rate, low market share
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 Business-Level Strategy
◦ A strategy that seeks to determine how an
organization should compete in each of its
businesses (strategic business units).
 Low-cost provider
 Differentiation
 Focus/Niche
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 Competitive Advantage
◦ An organization’s distinctive competitive edge that
is sourced and sustained in its core competencies.
 Quality as a Competitive Advantage
◦ Differentiates the firm from its competitors.
◦ Can create a sustainable competitive advantage.
◦ Represents the company’s focus on quality
management to achieve continuous improvement
and meet customers’ demand for quality.
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 Sustainable Competitive Advantage
◦ Continuing over time to effectively exploit
resources and develop core competencies that
enable an organization to keep its edge over its
industry competitors.
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 Threat of New Entrants
◦ The ease or difficulty with which new competitors
can enter an industry.
 Threat of Substitutes
◦ The extent to which switching costs and brand
loyalty affect the likelihood of customers adopting
substitutes products and services.
 Bargaining Power of Buyers
◦ The degree to which buyers have the market
strength to hold sway over and influence
competitors in an industry.
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 Bargaining Power of Suppliers
◦ The relative number of buyers to suppliers and
threats from substitutes and new entrants affect the
buyer-supplier relationship.
 Current Rivalry
◦ Intensity among rivals increases when industry
growth rates slow, demand falls, and product prices
descend.
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 Cost Leadership Strategy
◦ Seeking to attain the lowest total overall costs
relative to other industry competitors.
 Differentiation Strategy
◦ Attempting to create a unique and distinctive
product or service for which customers will pay a
premium.
 Focus Strategy
◦ Using a cost or differentiation advantage to exploit
a particular market segment rather a larger market.
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 The Rule of Three
◦ The competitive forces in an industry, if unfettered,
will inevitably create a situation where three
companies (full-line generalists) will dominate any
given market
◦ Some firms in the same market become super niche
players and while others end up as stuck-in-the-
ditch dwellers.
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 Cost Leadership
◦ On-line activities: bidding, order processing,
inventory control, recruitment and hiring
 Differentiation
◦ Internet-based knowledge systems, on-line
ordering and customer support
 Focus
◦ Chat rooms and discussion boards, targeted web
sites
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 Giving the customers what they want.
 Communicating effectively with them.
 Providing employees with customer service
training.
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 Possible Events
◦ Radical breakthroughs in products.
◦ Application of existing technology to new uses.
 Strategic Decisions about Innovation
◦ Basic research
◦ Product development
◦ Process innovation
 First Mover
◦ An organization that brings a product innovation to
market or use a new process innovations
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